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EOH acts to calm market jitters

Technology group EOH Holdings has reviewed its governance and risk procedures to reassure shareholders that it has robust and resilient compliance programmes in place.

CEO Zunaid Mayet’s four months at the helm have been hit by media coverage about some of its government contracts. This resulted in a sharp drop in the share price.

Mayet, who took over from EOH founder Asher Bohbot after he suddenly stepped down, said the review process, which took place every two years, was already in place but was accelerated following the reports.

"One has to be aware what’s happening in our market.

"There are heightened levels of risk associated with doing business in the public sector, so we have to respond to make doubly sure that as we engage, we provide the framework and comfort that in everything we do, there is an independent oversight," Mayet said.

Independent analyst Chris Gilmour said that while reports had hit the company’s share price and reputation, he expected it to recover "in the next six to 12 months".

"I have always taken a view that EOH is a quality company."

EOH’s share price has fallen almost 40% since January. On Tuesday, it dropped 5.37%, to close at R98.15.

EOH reported a 29% rise in operating profit to R1.8bn in the year to July. Operating margins grew to 11.5%, from 10.8%. Headline earnings per share were up 16%, to R8.32c. A dividend of R2.15c was declared, up 16%.

EOH’s group revenue rose 21%, to R15.5bn. Growth arose from across the business units.

The biggest contributor to revenue was the information technology services business unit, which grew 21% to R5.2bn.

Kaplan Equity Analysts MD Irnest Kaplan said that, while it would be difficult to repeat the growth, EOH remained a solid company that continued to pay dividends.

"As they get bigger, [growth] will slow down further.

"They are transitioning into a slower-growing but larger company," Kaplan said.

Gilmour said the market now at least had a clear idea of where the earnings and revenue were generated. The realisation that two-thirds of growth was organic and one-third stemmed from acquisitions "puts to rest" the notion EOH was relying on acquisitions for growth, he said.